Talking Points:

  • Risk-off deepened in Asia amid rumours of China’s RRR cut, despite strong NFP and higher CNY fix
  • Gold elevated above 1100 on safe haven interests, amid huge regional risk rout
  • Oil slid into 32s again as China growth concerns hurt demand prospect
  • Copper dipped below 2.00 along with losses in regional stocks

Asian markets spent the day mostly selling risk assets, following negative sentiment in US session as rumours circled about a cut in China’s required-reserve-ratio (RRR). This measure of a commercial bank’s reserve (placed at PBoC) over actual lending is now a tool to stabilize financial market. A cut would imply growing trouble in the economy.

Today’s higher CNY fix and assurance from State Administration of Foreign Exchange (SAFE) have not averted outflows, nor did a strong Non-Farm Payrolls data in the US Friday.

Oil price dropped throughout Asian trading toward mid 32s, dangerously close to last Thursday’s multi-year low at 32.10. A 20 rig drop recorded by Baker Hughes Inc on Friday was largely ignored in the fact of on-going price slump. There is little to save oil price except for a return of risk appetite and therefore commodity buying.

Gold price elevated above 1100 once more, in reserve to the rest of commodities. The safe haven asset gathers considerable buying interests amid current risk rout in Asia, thus will likely retain this level. Gold holdings by exchange-traded funds increased 0.8 percent during the week ended January 8, according to Bloomberg.

Copper price dipped below 2.0020 for the first time in many years on COMEX, while it sank to the lowest since 2009 on London Metal Exchange. Metals stayed weak together with regional stocks, as the flow of pessimistic comments pressured demand prospect. China Securities Journal quoted a top advisor that China would find it difficult to achieve economic growth above 6.5 percent due to slowing demand and raising labour costs.

GOLD TECHNICAL ANALYSIS – Gold price bounced back near the top of last week’s rally at 1113 although a break of this resistance is uncertain. 5-day moving average continues to provide an immediate support level on the downside at 1097.3. Momentum signals in overbought territory could be a hint of an upcoming correction.

Oil, Copper Suffer from Heavy Risk Rout while Gold Price Elevates

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price lingers in 1.99 area after it broke below 2.00 for the first time in years. Further dips are not yet ruled out while momentum builds. It is all about the downside in near future, although the bears should be mindful of support levels when placing trades.

Oil, Copper Suffer from Heavy Risk Rout while Gold Price Elevates

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil price struggles to stay afloat off the 2008 low of 32.41 as it flirts with the support level on a third consecutive session. Like the rest of commodities, near term development for oil is focused on the downside. However the presence of a multi-year low in this proximity could lead to a swift reversal to avert a break, if market sentiment changes.

Oil, Copper Suffer from Heavy Risk Rout while Gold Price Elevates

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Contact and follow Nathalie on Twitter: @nathuynh